Question

1. The DL budget, S&A budget, unit cost and budgeted income statement: P.S. Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:

• The budgeted selling price per unit is $120. Budgeted unit sales for January, February, March, April and May are 4,200;   4,400;   5,000;   4,800; and 5,100 units, respectively. All sales are on credit.
• Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month.
• The ending finished goods inventory equals 20% of the following month's sales.
• The ending raw materials inventory equals 30% of the following month’s raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $3.00 per pound.
• Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.
• The direct labor wage rate is $15.00 per hour. Each unit of finished goods requires 1.5 direct labor-hours.
• Manufacturing overhead is entirely variable and is $6.00 per direct labor-hour.
• The variable selling and administrative expense per unit sold is $4.60. The fixed selling and administrative expense per month is $13,000.

1. What is the amount of units P.S. Corp. is required to produce in March?
2. What is the estimated total cost of the direct materials (DM) that are needed to be purchased in March?
3. What is the estimated total direct labor (DL) cost for March?
4. What is the estimated unit product cost?
5. What is the estimated selling and administrative expense for March?
6. What is the estimated net operating income (loss) for March?

Answer 1

Answer is given below with all working

Production in march 4,960 units Production Budget March 5,000 Sales Add: Closing inventory Total Needs Less: Opening inventory Production Budget April 4,800 1,020 5,820 960 5,960 1,000 4,960 960 4.860 Material to be purchased in March $59,160 4,960 Material Purchase Budget Production Units Material needed per unit of output Material needed for production Add: Closing inventory Total Needs Less: Opening inventory Purchase budget (Units) Purchase price Purchase Budget (Value) 19,840 5,832 25,6721 5,952 19,7201 $3.00 $59,160 Estimated Total Direct Labor Cost $111,600 4,960 1.5 Direct Labor Budget Total Production Direct Labor hour per unit Total Direct labor hours Labor hour rate Direct Labor hour cost 7,440 $15.00 $111,600 d Estimated Unit product Cost $43.50 Unit Product cost Direct Material Direct Labor Manufacturing Overhead Unit Product cost $12.00 $22.50 $9.00 $43.50 e Estimated Selling and Admn Expense | $36,000 Selling and administrative expense Units Sold Selling and administrative expense per unit Variable S&A Fixed S&A Total Selling and Administrative Expense 5,000 4.6 $23,000 $13,000 $36,000 Net Operating Income $346,500 Budgeted Income Statement Sales Less: Cost of Goods Sold Gross profit Less: Operating Expenses Selling and Administrative Expense Net Profit $600,000 $217,500 $382,500 $36,000 $346,500